The former NHLer alleges usury, claiming a Brookfield subsidary pulled a loan to gain control of a quarry for pennies on the dollar
CALGARY—A group of investors led by former Toronto Maple Leaf and Calgary Flames star Lanny McDonald will face off with corporate heavyweight Brookfield Asset Management Inc. in the Alberta Court of Appeal today.
The two sides are at odds over how a company called Birch Mountain Resources Ltd. went under in 2008, and how its $1.6 billion limestone quarry in the heart of Alberta’s oilsands ended up in Brookfield’s hands for less than $50 million.
McDonald and his co-plaintiffs allege in court documents that Brookfield subsidiaries used “misleading,” “usurious” and “oppressive” actions to gain control of the company and its quarry.
Brookfield said the accusations are “meritless, frivolous and an abuse of process” in court filings.
Last year a Calgary judge agreed, dismissing the case and ruling that there was no merit to the claim.
Now McDonald, who became an independent director and shareholder at Birch Mountain following his storied NHL career, will be back in court armed with new evidence as his legal team tries to launch an appeal.
McDonald could not be reached for comment.
For John Mazag, a Birch Mountain shareholder who had invested most of his savings and then lost it all when the company went bankrupt, the appeal is important both financially and for the principal at stake.
“To me this is another story about corporate greed,” said Mazag.
He said he was hopeful when Brookfield subsidiary Tricap Partners Ltd. agreed to invest in Birch Mountain because it had the deep pockets to help fund the hundreds of millions of dollars needed to put the quarry into full production.
“I was excited about Brookfield coming on board because I knew they had the financial wherewithal to help us through,” said Mazag.
But that opinion changed as the company called in its loan less than a year after first lending $31.5 million to the company.
“Brookfield wants you to think they’re a value investor, but from a shareholder standpoint, I think Brookfield uses more predatory lending practices,” said Mazag.
Brookfield, which declined to comment, said in court filings that in 2008, Birch Mountain defaulted on loan provisions several times, was losing money, and was failing to meet production targets.
By November 2008, Tricap called in its loan that was secured by all of Birch Mountain’s property, and eventually took control of the quarry.
The plaintiffs say Tricap didn’t act in good faith, while Brookfield said Tricap met all obligations under the loan agreement.
A Calgary appeal judge will hear arguments today on whether the case should go any further.